Introduction
Section 47A of Competition Act
Facts
CAT decision
Court of Appeal decision
Supreme Court decision
Comment
On April 9 2014 the Supreme Court, reversing the Court of Appeal's decision, upheld the Competition Appeals Tribunal's (CAT) finding that the limitation period for bringing a follow-on damages claim under Section 47A of the Competition Act 1998 cannot be extended against a non-appealing addressee by virtue of appeals by other addressees of a European Commission decision.(1)
As a result, on May 2 2014 the CAT published an order withdrawing the damages action that had been brought by Deutsche Bahn AG and others against Morgan Advanced Materials Plc (formerly Morgan Crucible Co Plc) on the basis that it was out of time.
Section 47A of Competition Act
A person who has suffered loss or damage by virtue of an infringement of relevant EU or UK competition law(2) is entitled to bring a claim for damages suffered as a result of that infringement under Section 47A of the Competition Act.
Rule 31 of the Competition Appeal Tribunal Rules (SI 2003/1372) provides that a claim for damages must be brought within two years of the "relevant date", being the later of:
- the date on which the right to bring an appeal against a relevant decision expires;
- the date on which such an appeal is determined; or
- the date on which a cause of action accrued.
During the period in which an appeal against a European Commission decision may be instigated or – if any such proceedings are instigated – the period before those proceedings are determined, a damages action may not be brought without the permission of the CAT.
The European Commission issued a decision on December 3 2003 holding that a carbon and graphite market cartel had infringed Article 81(1) of the European Community Treaty (now Article 101 of the Treaty on the Functioning of the European Union). The alleged cartel had been involved in price fixing and market sharing. Fines totalling €101.44 million were imposed on six companies, although leniency was granted in relation to the fine against Morgan.
A number of the defendant companies lodged appeals against the decision, which were dismissed in their entirety by the EU Court of First Instance (now the General Court) on October 8 2008. Morgan did not appeal the decision. The time limit to appeal expired on December 18 2008.
In December 2010 Deutsche Bahn AG and a number of other claimants issued a claim for damages against the addressees of the decision pursuant to Section 47A of the Competition Act. They claimed that they had purchased products which were the subject of the cartel, or goods or services which incorporated those products, during the existence of the cartel. They therefore claimed for loss or damages allegedly sustained as a result of the defendants' infringements.
Morgan applied to the CAT for an order, further to Rule 40 of the CAT Rules, rejecting the claims against it on the grounds that they had not been brought within the time limit set out in Rule 31 of the rules.
The CAT held that the limitation period to bring a damages action against Morgan expired two years after the date on which Morgan could have brought an appeal against the European Commission decision. The CAT decision in this case was based on a narrow interpretation of 'decision', which it interpreted as referring to the decision with respect to an individual addressee/defendant.
The CAT therefore dismissed the actions against Morgan as being out of time. The claims would have had to have been issued by February 14 2006 – two years after the date by which Morgan had to have brought any appeal.
The Court of Appeal disagreed with the CAT's findings and held that a 'decision' under the Competition Act is a decision that there has been an infringement of competition law, and therefore the limitation period is extended while an appeal is pending – or while a decision can still be appealed – before the European courts.
The CAT held that the time limit for a follow-on damages action against Morgan was the same as that applicable for actions against the defendants that had appealed. Therefore, the claim was not out of time, as the time for an appeal from the General Court's decision expired on December 18 2008 and the two-year limitation period ran from this date.
The Supreme Court considered that the main issue in this case was whether the "decision" referred to in Section 47A of the Competition Act and Rule 31 of the CAT Rules was:
- the original European Commission decision of February 13 2004 against Morgan, which was not appealed by Morgan (this was the view of the CAT); or
- the European Commission's decision considered as a decision against all cartel members, appealed by the majority of them and finally upheld (as to liability) by the General Court in October 2008, with time starting to run from December 18 2008 – the expiry date for a further appeal.
The Supreme Court held that the Court of Appeal had wrongly concluded that EU law was irrelevant to the nature of the decision to which Section 47A refers. The Supreme Court found that Section 47A critically cross-refers to a matter determined by EU law (the decision establishing the infringement), and therefore that to understand the nature of the decision, regard must necessarily be given to EU law.
Accordingly, it was necessary to consider whether, under EU law, a decision operated against all addressees or against each addressee separately. Relevant EU authorities have established that a European Commission decision in relation to the existence of a cartel constitutes a series of decisions addressed to each addressee individually.
The Supreme Court held that even if the appeals by the other defendants against the European Commission's decision had succeeded, they would have made no difference to the findings of an infringement of EU competition law by Morgan. The decision was the only decision against Morgan in EU law, and therefore the only relevant decision for the purposes of Section 47A.
The Supreme Court therefore overturned the Court of Appeal's decision and reinstated the decision of the CAT.
The Supreme Court's decision has brought clarity in relation to the court's view of when time starts to run for the purposes of damages claims under Section 47A of the Competition Act where appeals have been brought against a European Commission decision by some addressees, but not others. Damages claims against a non-appealing addressee must be brought within two years of the date from which the right to appeal the decision against that particular addressee expires.
While this decision clarifies the present position, the Consumer Rights Bill notably proposes harmonisation of the limitation period for bringing damages claims under the Competition Act with the six-year period to bring a claim before the High Court. The bill is pending before the House of Commons and is expected to receive royal assent in late 2014.
For further information on this topic please contact Katie Wright or Andy McGregor at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
Endnotes
(1) Deutsche Bahn AG v Morgan Advanced Materials Plc (formerly Morgan Crucible Co Plc) [2014] UKSC 24.
(2) A relevant infringement for these purposes is either:
- a European Commission finding that either Article 101(1) or Article 102 of the Treaty on the Functioning of the European Union has been infringed; or
- a decision by a UK competition authority that Article 101 or Article 102 and/or either the Chapter I or Chapter II prohibition has been breached.
